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LocalEncryptedStore is meant for sensitive data that other users of the system should not be able to access. You could use it to store your questions and the user won't be able to access it easily. But there is no way to distribute it. You'd have to distribute the data in a normal sqlite db or XML file, read it and populate the LocalEncryptedStore and then delete your DB / XML file.
You can only make it really hard to access your data. If they wanted and knew how, eventually they will be able to access your data once you distribute it with your app.
Disclaimer: This method is not completely safe. This is true regardless of using AIR or not.
You could encrypt each record of your database (using as3crypto) or XML file and only your app would know how to decrypt it. So if they simply opened the sqlite db file using an sqlite client, it won't work because it has to be decrypted first.
Thanks for the response. The only thing that I'm curious about is how could I encrypt the xml file?